Ferma news - The property insurance market for European multinationals is either bending gracefully or teetering on the brink . . .

eThe property insurance market for European multinationals is either bending gracefully or teetering on the brink of a new downward cycle; it is not clear which from a report just published by the broker Aon. Its European Property Report 2003 states both that "underwriters are introducing a significant element of compromise - both on price and terms and conditions" and at the same time that underwriting discipline is firm across the board; rates, deductibles and retentions remain high and coverage remains narrow with terms and conditions tight.

Aon's research covered 11 European markets in the summer of 2003. Among the findings were:

  • Buyers believe that prices are high, but not prohibitive
  • There is adequate capacity for all but upper limits of coverage and business and contingent business interruption losses
  • Buyers have increased self-insurance and retentions. With cover at the upper limits "prohibitively expensive" in many cases, buyers are exposed at both ends of the scale
  • Insurers continue to press for more detailed risk profile information. "After years of apparent indifference, this has come as something of a shock to European buyers." Outside the major financial districts of Frankfurt, London and Paris, European clients are largely unworried about terrorism. "Many feel that their operations are unlikely to become targets and that terrorism cover is an irrelevance."

    The report concludes: "The continuing sober mood among underwriters, still mindful of past losses and starved of investment income, has so far been sufficient to hold the line against material rate reductions. But barring significant new losses to the major markets, a softer market environment is not too far away. The unspoken assumption is that some underwriters will soon break ranks with the more disciplined underwriting stance that has prevailed since 2001 and competition will begin to drag rates down again."

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